Questions over Federal Reserve talks with Bush

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Alan Greenspan . . . a more frequent visitor to this US Administration.

US Federal Reserve chairman Alan Greenspan's meetings at the White House and with top officials became much more frequent after President George Bush took office in January 2001, according to records released to an academic under the Freedom of Information Act.

As terrorism and war replaced concerns about financial instability as the top-tier threats to the US economy, Dr Greenspan broadened the group of officials with whom he maintains frequent contacts to include the National Security Adviser, Condoleezza Rice, the White House chief of staff, Andrew Card, and the Secretary of State, Colin Powell.

Dr Greenspan does not discuss his consultations and Bush officials he met also declined to talk.

But a Federal Reserve spokeswoman, Michelle Smith, said Dr Greenspan met foreign policy officials to discuss international economic policy. Middle East instability and its potential effects on the world oil supply have become key concerns. Another topic is the interplay of economic and foreign policy issues.

The Federal Reserve's ability to conduct monetary policy without regard to political fallout is thought to be key to its credibility in financial markets.

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Dr Greenspan maintains public contact with Administration officials. But the Federal Reserve has been seen as so independent early in his 17-year tenure as chairman that some in the first Bush White House blamed him for contributing to their 1992 election loss to Bill Clinton.

President George W. Bush said last week he is renominating Dr Greenspan to a fifth term.

Kenneth Thomas, a lecturer in finance at the Wharton School at the University of Pennsylvania, questions the frequent contact.

"There's the appearance that [Greenspan] might not just be affected by economic winds, but possibly by political winds," said Dr Thomas, who obtained records of Dr Greenspan's appointments going back to 1996 and published his findings in The American Banker last month.

Dr Thomas praised Dr Greenspan's performance as Federal Reserve chairman. But he noted that Dr Greenspan provided crucial support for the Bush tax cuts, and advocates making them permanent.

Dr Greenspan's meetings mark "a huge and historic shift," said Donald Kettl, a professor of political science at the University of Wisconsin at Madison.

Professor Kettl said the September 11, 2001 terrorist attacks and following war probably prompted discussions between Dr Greenspan and foreign policy officials "because of the fear that terrorism could have a dramatic impact on the economy". But even so, the numbers indicate "a stunning rise and increase in the level of communication, and one can only wonder what they were talking about," he said.

The records show that Dr Greenspan has called on the White House Council of Economic Advisers about as often during Mr Bush's years as he did in the four years of President Clinton's second term.

But the number of appointments with other White House officials jumped sharply with the new administration, from an average of three per year from 1996 through 2000, to 44 per year in 2001 through 2003.